Telstra rally offsets iron ore gloom

Markets reporter

A continued rally in Telstra, a warm reception to Woodside Petroleum's decision to pull the plug on an Israeli joint venture, and international interest in beleaguered Treasury Wine Estates pushed the sharemarket marginally higher. The index recovered from early losses sparked by another drop in the iron ore price and a slump in consumer confidence to close flat on Wednesday.

The benchmark S&P/ASX 200 Index edged up 4.2 points, or a bit less than 0.1 per cent, to 5419.7, while the broader All Ordinaries Index added 2.2 points to 5403.9.

Local shares took a weak lead form offshore after major markets in the United States and Europe finished lower on Tuesday night. Asian sharemarkets were mixed in the afternoon session.

Domestically, investor sentiment was subdued amid further evidence consumer confidence is at a more than 2 1/2 year low. The monthly Westpac/Melbourne Institute index of sentiment slumped 6.8 per cent to 92.9 points in May from 99.7 in April.

Meanwhile, Australian Bureau of Statistics data showed wages grew 0.7 per cent over the March quarter. Wages are up 2.6 per cent over the past 12 months.

The big four banks were mixed. Westpac Banking Corporation edged down 1¢ to $33.67, and National Australia Bank fell 0.2 per cent to $33/05. Commonwealth Bank of Australia added 0.5 per cent to $80.19, while ANZ Banking Group lifted 0.9 per cent to $33.03.

Mining stocks tumbled as the spot price for iron ore, landed in China, slipped another 1 per cent to $US97.50 per tonne - its lowest price since September 2012.

The country's biggest producer of iron ore, Rio Tinto, lost 1.1 per cent to a near nine month low of $59.40. Resources giant BHP Billiton shed 0.8 per cent to $37.17, while the third largest local iron ore miner Fortescue Metals Group fell 2.4 per cent to $4.43.

With Rio Tinto trading under $60 for the first time this year, some stockbrokers were expecting increased interest in the big miners from retail investors in early trading on Thursday. But Pengana Global Resources Fund portfolio managerRic Ronge

said he was wary of earnings downgrades from Rio Tinto and BHP Billiton as the iron ore price continues to slide.

"With 80 per cent of its revenue coming from iron ore, Rio Tinto is particularly exposed to a lower iron ore price," Mr Ronge said. "The strategy of increasing volumes, contributing to increasing global supply at a time of declining demand growth in the main end market of China presents a risk."

Woodside Petroleum, lifted 0.8 per cent to $41.23 with investors now expecting a capital return after the company terminated its agreement to take a stake in a $US2.7billion natural gas project in Israel.

Treasury Wine Estates was the best-performing stock in the ASX 200 as it continued to get a boost from Tuesday's revelation the company rejected a private equity takeover bid last month with $US125 billion Chicago-based investment firm Harris Associates L.P. emerging as a new significant shareholder. Shares in TWE, owner of Penfolds and Lindemans, added 5.6 per cent to $5.07 - above $5 for the first time since November.

Telstra Corporation lifted 1.1 per cent to a fresh nine year high at $5.36 after unveiling a plan on Tuesday to spend $100 million rolling out a nationwide Wi-Fi network to launch in early 2015. Credit Suisse analystFraser McLeish

described it as "a sound strategic move" and reiterated his "buy" recommendation and 12 month target price of $5.70.

Coca-Cola Amatil was another heavy lifter, up 4 per cent to $9.92. The biggest retailers of food and liquor moved higher. Woolworths rose 0.4 per cent to $37.25, while Wesfarmers, owner of Coles, edged up 0.1 per cent to $42.74.

Building materials group James Hardie added 2.2 per cent to $13.69 with JPMorgan analysts tipping the company will show an annual net profit of $US198 million, at the upper end of guidance for $US190 million to $US200 million, when it reports for the year ended March 31 on Thursday. Rival Adelaide Brighton was the worst-performing stock in the ASX 200, down 5.9 per cent at $3.53 after incoming chief executive Martin Brydon flagged a 7 per cent annual profit downgrade.